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Welcome to the Stocks and Shares ISA club!

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A positive message for the growing number of savers switching into stocks and shares ISAs in search of better returns.

by Gavin Lumsden on Nov 15, 2013 at 17:31

Welcome to the Stocks and Shares ISA club!

If there was such a thing as the Stocks & Shares ISA Investor Club and if I was its membership secretary this would be my address to its new recruits.

This flight of fancy is a response to news that more people are switching money from cash ISAs into stocks and shares ISAs in search of a better return on their money.

This is a video in the Lolly Investor Programme, a series aimed at beginner investors.

You can watch earlier programmes here.

Can't watch now? Read my script instead.

Recently we’ve had news of a surge in the amount of money people are transferring from cash ISAs into stocks and shares ISAs.

Normally ISA transfers spike at the end of the tax year in April. The unseasonal increase has got experts wondering if something important is going on.

Could it be that after years of ultra-low interest rates people are taking the plunge, moving their money out of cash and into the stock market in the hope of a better return?

In short, are Britain’s savers becoming investors? Are they joining the stock market club?

I’m assuming that’s the case so I've come to Pall Mall in London, home to some of the country's most elite clubs.

As the self-appointed membership secretary of the Stocks and Shares ISA Investors club (or SASII for short) I’d like to say a few words to our new members.

First of all: well done for deciding to put your money into the stock market! You’re definitely doing the right thing.

Even though interest rates may start to rise in the next few years, the fact is investing in stocks and shares is one of the most effective ways of growing your money above inflation.

Secondly, now you‘ve invested, don’t stop. Keep the money coming!

There’s no minimum annual membership fee to this club but to get the most out of investing you should make as much use of your annual stocks and shares ISA allowance as you can.

In the 2013/14 tax year you can invest up to £11,520 – that’s nearly a £1,000 a month you can shelter from the tax man.

I’m pleased to see a lot of you have joined the equity income members’ group of the club.

That means you’ve put money into a fund investing in companies either paying good dividends or that are expected to grow their dividends in future.

As you probably know, the income from dividends is very different from the interest on cash. Companies can cut or scrap their dividends at any time.

However, by spreading your money over lots of different companies your fund will reduce that risk.

Although the income from shares – or equities – is not as predictable as the interest on cash, it’s higher and can grow at a faster rate.

The income from dividends is one of the main long-term drivers of stock market returns.

So even if you’re a growth investor who doesn’t need that income right now you’ll be pleased to hear that shares in companies that grow their dividends tend to do very well.

I know it’s exciting to be a new member but can I urge you not to use our amenities too much?

Some people make the mistake of being overly active investors.

Whether they’re worrying about their investments or chasing the latest stock market fad, some people tinker too much with their investments.

Remember, you need to give investments time to do well. Unlike cash, stock markets do not move in a straight line.

So take a seat by the bar and try and relax!

But don't switch off altogether like some of our older members in the library!

You do need to keep your money in shape with an annual review. The prospects for funds and shares can change and it’s important to keep an eye on things and make changes where necessary.

Well, that’s all I’ve got to say to new joiners of the stocks and shares ISA club. Anything else you need to know you can learn as you go along. The important thing is you’ve got started investing. With a bit of luck and discipline you’ll probably be very pleased you did in the years ahead.

2 comments so far. Why not have your say?

Anonymous 1 needed this 'off the record'

Nov 18, 2013 at 22:05

More so than other news stories, this makes me think we will shortly get a stock market "correction".

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Nov 19, 2013 at 16:09

Annual review? daily more like. People are fed up with keeping debtors in Luxury, at least when the cash dries up the banks will have to come begging to us, then there will be some whinging!

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